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Retirement of a Partner 4.9
Working Notes:
1. Adjustment of Goodwill:
B’s Share of Goodwill = ` 24,000 × 2/6 = ` 8,000, which is contributed by A and C in their Gaining Ratio
of 3 : 7.
A’s contribution = ` 8,000 × 3/10 = ` 2,400.
C’s contribution = ` 8,000 × 7/10 = ` 5,600.
2. Computation of Gaining Ratio:
Gain = New Share – Old Share
A’s Gain = 3/5 – 3/6 = 3/30; C’s Gain = 2/5 – 1/6 = 7/30
Gaining Ratio = 3/30 : 7/30 or 3 : 7
3. Cash to be brought in by A and C: `
Amount payable to B 84,100
Add: Amount to be retained as Working Capital 20,000
1,04,100
Less: Cash already available 58,000
Cash to be brought in by A and C 46,100
Adjusted Old Capital of A ` (40,000 + 150 + 15,000 + 9,000 – 2,400) = ` 61,750.
Adjusted Old Capital of C ` (20,000 + 50 + 5,000 + 3,000 – 5,600) = ` 22,450.
Total Capital of the New Firm (` 46,100 + ` 61,750 + ` 22,450) = ` 1,30,300.
A will bring (` 1,30,300 × 3/5 – ` 61,750) = ` 78,180 – ` 61,750 = ` 16,430.
C will bring (` 1,30,300 × 2/5 – ` 22,450) = ` 52,120 – ` 22,450 = ` 29,670.
Illustration 6.
A, B and C were equal partners. Their Balance Sheet as at 31st March, 2018 is given below:
BALANCE SHEET as at 31st March, 2018
Liabilities ` Assets `
Bills Payable 20,000 Bank 20,000
Creditors 40,000 Stock 20,000
General Reserve 30,000 Furniture 28,000
Profit and Loss A/c 6,000 Debtors 45,000
Capital A/cs: Less: Provision for Doubtful Debts 5,000 40,000
A 60,000 Land and Building 1,20,000
B 40,000
C 32,000 1,32,000
2,28,000 2,28,000

B retired on 1st April, 2018. A and C decided to continue the business as equal partners
on the following terms:
(i) Goodwill of the firm was valued at ` 57,600.
(ii) Provision for Doubtful Debts to be maintained @ 10% on Debtors.
(iii) Land and Building to be increased to ` 1,32,000.
(iv) Furniture to be reduced by ` 8,000.
(v) Rent Outstanding (not provided for as yet) was ` 1,500.
The remaining partners decided to bring sufficient cash in the business to pay off B and
to maintain a bank balance of ` 24,800. They also decided to readjust their capitals as per
their new profit-sharing ratio.
Prepare necessary Ledger Accounts and Balance Sheet. (ISC 2001, Modified)